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- GDP (PPP):
- $66.3 billion
- 1.0% growth
- 4.5% 5-year compound annual growth
- $14,845 per capita
- Inflation (CPI):
- FDI Inflow:
Lebanon’s economic freedom score is 59.3, making its economy the 94th freest in the 2015 Index. Its score is essentially unchanged from last year, with a loss of 0.1 point reflecting declines in the control of government spending, monetary freedom, and business freedom that offset improvements in freedom from corruption, labor freedom, and fiscal freedom. Lebanon is ranked 10th out of 15 countries in the Middle East/North Africa region, and its overall score is below the world average.
Political instability and diminishing confidence in the domestic economy reflect the slow degradation of Lebanon’s economic freedom over the past five years. A decline of 0.8 point since 2011 reflects deteriorations in four of the 10 economic freedoms, including property rights, monetary freedom, and trade freedom.
These declines have weakened the already fragile structural and institutional environment. Restrictive business and labor regulations inhibit business formation and the development of a dynamic private sector. Prevalent corruption has undermined the basic political institutions of society. The banking sector is relatively well developed, but the economy remains more closed to trade and investment than many of its regional peers.
Since 1975, Lebanon’s economy has been disrupted by civil war, Syrian occupation, Hezbollah clashes with Israel, political uncertainty, and sectarian tensions. Syria was forced to withdraw its army in 2005 after its government was implicated in the assassination of former Lebanese Prime Minister Rafiq Hariri. In 2006, Lebanon-based Hezbollah forces instigated a conflict with Israel. Hariri’s son, Saad Hariri, was elected prime minister in June 2009, but his government collapsed in January 2011 when Hezbollah engineered the elevation of Najib Mikati as prime minister. Mikati resigned in March 2013, and Tammam Salam was asked to form a caretaker government until new elections slated for November 2014. Economic growth has fallen dramatically due to the civil war in neighboring Syria and growing instability triggered by rising Sunni–Shia sectarian tensions.
Corruption pervades the public sector, and Lebanon’s proximity to the Syrian crisis heightens political instability. The sectarian political system and the powerful role of foreign patrons limit elected officials’ accountability to the public. Lebanon’s judicial system is in need of root-and-branch reform to change both its procedures and many of its junior, middle-ranking, and senior personnel.
Lebanon’s top individual income tax rate is 20 percent, and its top corporate tax rate is 15 percent. Other taxes include an inheritance tax and a value-added tax. The overall tax burden equals 15.7 percent of domestic production. Public expenditures are equal to 31.3 percent of domestic output, and public debt is equivalent to 139 percent of gross domestic product.
Launching a business takes slightly more than a week, and minimum capital requirements cost about one-third of the level of average annual income. Obtaining necessary licenses takes over eight months on average. Outmoded labor laws undermine the development of a dynamic labor market. The state-owned and heavily subsidized electricity sector’s annual deficit consumes about a third of government revenue.
Lebanon’s average tariff rate is 4.8 percent. Imports of used cars and goods from Israel are restricted, as is foreign investment in several sectors of the economy. The financial sector is not well diversified and is dominated by banks. Competition among private banks has contributed to greater efficiency. With a high degree of resilience, banking remains the cornerstone of the economy.